United States Court of Appeals
Fifth Circuit
F I L E D
June 18, 2003
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
__________________________
No. 02-20550
__________________________
KARAHA BODAS COMPANY, L.L.C.,
Plaintiff-Appellee,
versus
PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA; ET AL,
Defendants,
PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA,
Defendant-Appellant.
___________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
___________________________________________________
Before WIENER and STEWART, Circuit Judges, and RESTANI, Judge.*
WIENER, Circuit Judge:
Defendant-Appellant Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara (“Pertamina”) appeals the district court’s preliminary
injunction prohibiting it from prosecuting an action it instituted
in Indonesia (1) to annul a Swiss arbitration award (the “Award”)
to Appellee, Karaha Bodas Company, L.L.C. (“KBC”) and (2) to enjoin
KBC from taking steps to enforce the Award.1 In addition,
*
Judge of the U.S. Court of International Trade, sitting
by designation.
1
In a separate challenge, Pertamina has appealed the
district court’s judgment enforcing the arbitral award.
Pertamina challenges the district court’s order holding it in
contempt for continuing to pursue the Indonesian action in
violation of the court’s initial temporary restraining order
(“TRO”).2 Given the structure and purpose of the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (the “New York Convention” or the “Convention”),3 and the
responsibilities of the United States under that treaty, we
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, 190 F. Supp. 2d 936 (S.D. Tex. 2001). KBC
moved to consolidate oral argument on enforcement of the
Award with the appeal here on the preliminary injunction but
that motion was denied. Order dated September 5th, 2002.
In March, 2003, the panel addressing enforcement remanded
the case for consideration of Pertamina’s Rule 60(b) motion,
and in April, 2003, the district court denied in part
Pertamina’s motion. In addition to the enforcement judgment
itself, there are subsequent similar injunctions issued by
the district court that are not before us. See, e.g., July
22, 2002 Order (requiring Pertamina to unequivocally and
strenuously request that the Indonesian court postpone
proceedings); July 3, 2002 Order (enjoining Pertamina from
taking substantive steps in furtherance of annulment). KBC
also has filed a second motion for contempt on grounds that
Pertamina has not complied with any of the court’s orders,
including the preliminary injunction on appeal here. KBC’s
Amended Second Motion for Contempt, June 11, 2002.
2
When the court issued its preliminary injunction order, it
expressly stated that both its TRO and its contempt order
were superceded by this injunction, but folded many of the
substantive provisions of those orders into the injunction.
Nevertheless, both Pertamina and KBC separately address the
validity of the contempt order. For a more complete
explanation of the status of the contempt order on appeal,
see infra Part II.D.
3
United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards [hereinafter “New
York Convention”], June 10, 1958, 21 U.S.T. 2517, 330
U.N.T.S. 38 (entered into force with respect to the United
States, Dec. 29, 1970), codified at 9 U.S.C. § 201 et seq.
2
conclude that the district court abused its discretion4 in granting
the preliminary injunction in favor of KBC, requiring that we
vacate that injunction and, to the extent necessary, the district
court’s order holding Pertamina in contempt.
I. FACTS AND PROCEEDINGS
The origins of this dispute lie in two contracts to construct
a power plant in Indonesia. Pertamina is an oil, gas, and
geothermal energy company that is wholly owned by the Government of
Indonesia (“GOI”). KBC is a Cayman Islands limited liability
private power development company established to develop geothermal
resources, including the construction and operation of electric
power generating facilities.5 In November 1994, KBC entered into
two contracts with Pertamina to develop the Karaha-Bodas Geothermal
Project (the “Project”), which included the building of a
geothermal power plant in West Java, Indonesia. Under the first
agreement, the Joint Operation Contract (“JOC”), KBC contracted
with Pertamina to develop geothermal energy resources from two
geothermal fields in Indonesia. In the second agreement, the
Energy Sales Contract (“ESC”), KBC, Pertamina, and Pt. PLN
4
See United States v. Logan, 861 F.2d 859, 866 n.5 (5th
Cir. 1988) (“abuse of discretion is a phrase which sounds
worse than it really is; it is simply a legal term of art
which carries no pejorative connotations of a professional
or personal nature”) (citation and internal quotation marks
omitted).
5
The principal investors in KBC are two energy companies:
Caithness Energy, L.L.C. (“Caithness”) and FPL Energy,
L.L.C. (“FPL”).
3
(Persero) (“PLN”), an electric company wholly owned by the GOI,6
agreed that Pertamina would sell the KBC-produced electricity to
PLN.
In 1997, the Indonesian economy suffered during the Asian
financial crisis. In January 1998, after a brief suspension and a
temporary restoration of the Project, the President of Indonesia
issued a decree suspending the Project indefinitely as part of a
national effort to stabilize the Indonesian economy. KBC declared
force majeure and ceased performance under the contracts.
The contracts contained almost identical comprehensive
consultation and arbitration clauses which required the parties to
arbitrate any disputes in Switzerland pursuant to the Arbitral
Rules of the United Nations Commission on International Trade Law
(the “UNCITRAL Rules”). In April 1998, KBC initiated arbitration
proceedings in Switzerland, claiming that Pertamina had breached
the contracts. Pertamina opposed arbitration on various grounds,
which included a challenge to the composition of the arbitration
panel. The panel rejected those objections and proceeded to
conduct a hearing on the merits in June 2000. In December 2000,
6
PLN, a party to the ESC agreement, was a respondent at
the arbitration, and was originally named a respondent in
the action before the district court, but was not served and
has been voluntarily dismissed from the case by KBC.
4
the panel ruled that Pertamina and PLN had breached the contracts
and awarded damages to KBC exceeding $260 million.7
In February 2001, Pertamina appealed the Award to the Supreme
Court of Switzerland. While that appeal was pending, KBC initiated
the instant proceedings in federal district court to enforce the
Award. Pertamina responded by challenging enforcement on four
grounds under Article V of the New York Convention: (1) The
arbitration panel was improperly composed (Article V(1)(d)); (2)
the arbitration procedures were not otherwise in accordance with
the agreement (Article (V)(1)(d)); (3) Pertamina was deprived of
its right to present its case (Article V(1)(b)); and (4) the
arbitral award violated United States public policy (Article
V(2)(b)).8 The district court denied Pertamina’s motion to stay
pending its appeal to the Supreme Court of Switzerland and directed
the parties to proceed with summary judgment briefing. The court
acknowledged, however, that it slowed the proceedings in deference
Pertamina’s request. The Swiss court eventually dismissed
Pertamina’s appeal on procedural grounds and denied its motion for
reconsideration.9 In December 2001, the district court granted
7
The arbitration panel awarded KBC (1) $111.1 million in
damages for lost expenditures; (2) $150 million in damages
for loss of profits; (3) $66,655 for costs and expenses of
the final phase of arbitration; and (4) 4% post-judgment
interest.
8
See New York Convention, art. V.
9
In April 2001, the Swiss Supreme Court dismissed
Pertamina’s claim because of untimely payment of costs.
5
KBC’s motion for summary judgment (the “Judgment”) to enforce the
Award.
Pertamina appealed the Judgment but declined to post a
supersedeas bond. In January 2002, the district court entered an
order allowing KBC to commence execution of the Judgment, and the
following month that court granted KBC leave to register the
Judgment in New York, Delaware, and California. KBC also brought
actions under the Convention in Hong Kong, Canada, and Singapore to
enforce the Award in those jurisdictions.
In March 2002, Pertamina filed an application in the Central
District Court of Jakarta to annul the Award (the “Indonesian
annulment action”). Pertamina also sought an Indonesian injunction
and penalties to prevent KBC from seeking to enforce the Award (the
“Indonesian injunction”). The Indonesian court scheduled a
proceeding for 10:00 a.m. on Monday April 1, 2002 to hear argument
on the proposed injunction. In advance of the Indonesian hearing,
however, KBC filed a motion in the district court on Friday, March
29, 2002, for a temporary restraining order to enjoin Pertamina
from seeking injunctive relief in Indonesia. In a telephonic
hearing that same evening,10 the court determined that KBC would
Pertamina moved for reconsideration, arguing that the late
payment was the result of circumstances beyond Pertamina’s
control. In August 2001, the Swiss Federal Tribunal denied
Pertamina’s request for reconsideration.
10
March 29, 2002, was a legal holiday in Indonesia (Good
Friday). Jakarta is 13 hours ahead of Houston (Central
Standard Time). Counsel for Pertamina participated by
6
suffer irreparable harm if the Indonesian court issued an
injunction to prevent KBC from “enforcing or executing” the
Judgment. The district court orally ordered Pertamina to withdraw
its application for injunctive relief at or before the hearing in
the Indonesian court and to take no substantive steps in that
court. The district court did not, however, prohibit Pertamina
from proceeding in Indonesia entirely; rather, it prohibited
Pertamina from taking any substantive steps (e.g., submitting legal
arguments) but permitted Pertamina to take any ministerial steps
necessary to maintain the cause of action. The court subsequently
explained that it issued the TRO (1) to preserve the integrity of
its judgment, which had become final and was on appeal to us
without bond, and (2) to maintain the parties’ positions as they
stood prior to Pertamina’s initiation of the Indonesian annulment
action.
Claiming that it lacked sufficient time to do so, Pertamina
did not withdraw its request for injunctive relief, and the
Indonesian court issued a provisional injunction prohibiting KBC
from seeking to enforce the Award. Later that day, Pertamina’s
president-director issued a statement to the effect that Pertamina
would not attempt to enforce the Indonesian court’s order with
respect to KBC’s enforcement actions in the United States.
phone.
7
KBC immediately filed a motion in the district court to hold
Pertamina in contempt of the TRO. Agreeing with KBC, the district
court (1) again ordered Pertamina to withdraw its Indonesian
application for injunctive relief against KBC, (2) found Pertamina
in contempt of the TRO, and (3) ordered Pertamina to indemnify KBC
for any fines resulting from the Indonesian injunction.11 Pertamina
notified the Indonesian court of the district court’s order but did
not request that the Indonesian court vacate or suspend its
injunction as directed by the district court.
KBC next filed a motion in the district court for a
preliminary injunction to prohibit Pertamina from further pursuing
the Indonesian injunction and the Indonesian annulment action. In
response, Pertamina filed a motion to purge the contempt order on
the ground that the statement by Pertamina’s president was
sufficient to establish substantial compliance with the TRO. In
subsequently granting KBC’s motion, the district court issued seven
orders: (1) It enjoined Pertamina from enforcing the Indonesian
injunction; (2) it enjoined Pertamina from collecting any fine or
penalty from KBC as a result of this injunction; (3) it extended
11
The district court actually issued two indemnification-
like orders. It ordered Pertamina to indemnify KBC for any
monetary penalties imposed by the Indonesian court, and it
ordered Pertamina to pay KBC for monetary penalties imposed
by any other court on the basis of the Indonesian
injunction, before such payment is due.
8
the indemnification aspects of its earlier contempt order;12 (4) it
enjoined Pertamina from taking any substantive steps to prosecute
the Indonesian annulment action; (5) it ordered Pertamina to advise
the Indonesian court that Pertamina cannot and will not take any
action to pursue the Indonesian annulment action; (6) it dissolved
the provisions of the TRO and contempt order to the extent those
orders differed with the preliminary injunction; and (7) it denied
Pertamina’s motion to purge contempt.
On May 7, 2002, Pertamina informed the Indonesian court of the
district court’s preliminary injunction and, pursuant to that
injunction, requested the Indonesian court to suspend the
proceedings indefinitely. A week later, the Indonesia court
rejected Pertamina’s request to suspend the litigation, in part
because PLN, which was also a party to the Indonesian litigation,
filed an objection to postponement, and in part because the court
concluded that it retained the authority to adjudicate the case.
Pertamina timely filed its notice of appeal to this court. In
May 2002, we denied Pertamina’s emergency motion for a partial stay
of the district court’s preliminary injunction. On August 27,
2002, while the matter was still under our review, the Central
Jakarta District Court concluded that it had primary jurisdiction
12
The indemnification provisions of the contempt order were
restated in the preliminary injunction. Although we may
discuss the indemnification on its own terms, by vacating
the preliminary injunction order today, we also vacate the
indemnification provisions of this order.
9
under the New York Convention and annulled the Award on grounds
that it was contrary to the Convention and Indonesian arbitration
law. The Indonesian court also permanently enjoined KBC from
seeking to enforce the Award and imposed a fine of $500,000 for
each day that KBC violated the Indonesian injunction.
In March 2003, the High Court of the Hong Kong Special
Administrative Region Court of First Instance issued an order
enforcing the Award in Hong Kong. Subsequently, the district court
addressed Pertamina’s Rule 60(b) motion to set aside judgement
pursuant to our remand. The court reaffirmed its summary judgment
in favor of KBC, concluding again that under the Convention the
courts of Indonesia are not competent to annul the Award.
In this appeal, Pertamina argues that the district court
lacked authority to issue the preliminary injunction and, in the
alternative, that the court abused its discretion by doing so.
Pertamina also appeals the district court’s contempt order, again
arguing that the district court lacked authority to enjoin
Pertamina from proceeding in Indonesia and, in the alternative,
that Pertamina substantially complied with the order.13
II. ANALYSIS
A. STANDARD OF REVIEW
13
Pertamina advances the argument as well that the district
court, in issuing the preliminary injunction, committed
reversible error by failing to require KBC to post security
to cover damages incurred by Pertamina if the injunction is
found to have been improvidently granted. As we decide this
case on other grounds, we need not address this argument.
10
We review a district court’s grant of a preliminary injunction
for abuse of discretion.14 Even though “the ultimate decision
whether to grant or deny a preliminary injunction is reviewed only
for abuse of discretion, a decision grounded in erroneous legal
principles is reviewed de novo.”15
Generally, four requirements must be met to obtain a
preliminary injunction:
(1) a substantial likelihood that plaintiff will prevail
on the merits, (2) a substantial threat that plaintiff
will suffer irreparable injury if the injunction is not
granted, (3) that the threatened injury to plaintiff
outweighs the threatened harm the injunction may do to
defendant, and (4) that granting the preliminary
injunction will not disserve the public interest.16
We have cautioned, however, that a preliminary injunction is “an
extraordinary remedy” which should only be granted if the party
seeking the injunction has “clearly carried the burden of
persuasion” on all four requirements.17 As a result, “[t]he
decision to grant a preliminary injunction is to be treated as the
exception rather than the rule.”18
14
Mississippi Power & Light Co. v. United Gas Pipe Line
Co., 760 F.2d 618, 621 (5th Cir. 1985).
15
Women’s Med. Ctr. v. Bell, 248 F.3d 411, 419 (5th Cir.
2001).
16
Canal Auth. v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974)
(citations omitted).
17
Mississippi Power & Light Co., 760 F.2d at 621.
18
Id.
11
The dispute at issue here concerns the district court’s
decision to issue a foreign antisuit injunction, a particular
subspecies of preliminary injunction. Although both the district
court and the parties discussed all four prerequisites to the
issuance of a traditional preliminary injunction, the suitability
of such relief ultimately depends on considerations unique to
antisuit injunctions.19 As we conclude that the district court
abused its discretion in granting the instant antisuit injunction,
we need not address all the factors that generally are
prerequisites to obtaining a preliminary injunction.
Finally, the district court’s determination of its
jurisdiction to enjoin Pertamina is an issue that we review de
novo.20 Still, we review the district court’s order holding
Pertamina in contempt, to the extent it still exists, only for
abuse of discretion.21
B. THRESHOLD MATTERS
1. Jurisdiction
19
To the extent the traditional preliminary injunction test
is appropriate, therefore, we only need address whether KBC
showed a significant likelihood of success on the merits.
The merits in this case, however, are not about whether
Indonesia is an appropriate forum to litigate an annulment
action, but instead whether KBC has demonstrated that the
factors specific to an antisuit injunction weigh in favor of
granting that injunction here.
20
United States v. Lynch, 114 F.3d 61, 63 (5th Cir. 1997).
21
F.D.I.C. v. LeGrand, 43 F.3d 163, 166 (5th Cir. 1995).
12
As an initial matter, Pertamina argues that the New York
Convention divests the district court of authority to enjoin a
party from proceeding in a court of primary jurisdiction (here,
Indonesia, at least according to Pertamina). The New York
Convention governs the confirmation and enforcement of the Award
and “mandates very different regimes for the review of arbitral
awards (1) in the [countries] in which, or under the law of which,
the award was made, and (2) in other [countries] where recognition
and enforcement are sought.”22 Under the Convention, “the country
in which, or under the [arbitration] law of which, [an] award was
made” is said to have primary jurisdiction over the arbitration
award.23 All other signatory States are secondary jurisdictions,
in which parties can only contest whether that State should enforce
the arbitral award. The limitation of being a court of secondary
jurisdiction, Pertamina contends, also deprives the district court
of the competence to issue injunctive relief here.
It is well established, however, that normally “federal courts
have the power to enjoin persons subject to their jurisdiction from
prosecuting foreign suits.”24 Moreover, “[a]bsent the clearest
22
Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126
F.3d 15, 23 (2nd Cir. 1997).
23
New York Convention, art. V(1)(e).
24
Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 626 (5th Cir.
1996); see also Gau Shan Co. v. Bankers Trust Co., 956 F.2d
1349, 1352 (6th Cir. 1992); China Trade & Dev. Corp. v. M.V.
Choong Yong, 837 F.2d 33, 35 (2nd Cir. 1987); Laker Airways
Ltd. v. Sabena, 731 F.2d 909, 926 (D.C. Cir. 1984); Seattle
13
command to the contrary from Congress, federal courts retain their
equitable power to issue injunctions in suits over which they have
jurisdiction.”25 Under the New York Convention and Chapter 2 of the
Federal Arbitration Act (the Convention’s implementing legislation)
federal courts maintain jurisdiction to hear cases like this.26
Although these treaty obligations limit the grounds on which the
court can refuse to enforce a foreign arbitral award, there is
nothing in the Convention or implementing legislation that
expressly limits the inherent authority of a federal court to grant
injunctive relief with respect to a party over whom it has
jurisdiction. Given the absence of an express provision, we
discern no authority for holding that the New York Convention
divests the district court of its inherent authority to issue an
antisuit injunction.27
2. Mootness
Totems Hockey Club, Inc. v. National Hockey League, 652 F.2d
852, 855 (9th Cir. 1981).
25
Califano v. Yamasaki, 442 U.S. 682, 705 (1979) (citing
Porter v. Warner Holding Co., 328 U.S. 395, 398 (1946);
Scripps-Howard Radio v. FCC, 316 U.S. 4, 9-11 (1942)).
26
9 U.S.C. § 203 (providing that a “proceeding falling under
the Convention shall be deemed to arise under the laws and
treaties of the United States”).
27
We need not, and thus do not, resolve the issue whether a
set of circumstances might exist under which a secondary
enforcement court under the New York Convention would be
justified in imposing an antisuit injunction.
14
Guided by the constitutional command in Article III that our
power extends only to actual cases or controversies, we require
that an actual controversy exist at every stage in the judicial
process.28 Federal courts “may not give opinions upon moot
questions or abstract propositions.”29 Thus, “if an event occurs
while a case is pending on appeal that makes it impossible for the
court to grant any effectual relief whatever to a prevailing party,
the appeal must be dismissed.”30 We have similarly recognized that
“[a] claim becomes moot when the issues presented are no longer
live or the parties lack a legally cognizable interest in the
outcome.”31
KBC contends that Pertamina’s appeal of the district court’s
April 26, 2002 preliminary injunction is moot because the
Indonesian court granted the annulment and injunctive relief that
KBC sought to prevent. We have recognized, however, that “the
collateral consequences doctrine serves to prevent mootness when
the violation in question may cause continuing harm and the court
28
In re Taylor, 916 F.2d 1027, 1028 (5th Cir. 1990).
29
Calderon v. Moore, 518 U.S. 149, 150 (1996) (quoting
Mills v. Green, 159 U.S. 651, 653 (1895)).
30
See Church of Scientology v. United States, 506 U.S. 9,
12 (1992) (citation and internal quotation marks omitted).
31
Piggly Wiggly Clarksville, Inc. v. Mrs. Baird’s Bakeries,
177 F.3d 380, 383 (5th Cir. 1999).
15
is capable of preventing such harm.”32 Thus, as long as there is
some interest in the outcome for which effective relief is
available, the case is not moot.33
In this case, even though KBC may not have been successful in
avoiding the Indonesian court’s annulment and injunction, there are
aspects of both the Indonesian court’s injunction and the district
court’s injunction that potentially could affect both parties to
this dispute. When the preliminary injunction superseded and
subsumed the TRO and the contempt order, it prohibited Pertamina
from substantively pursuing annulment in Indonesia and from
collecting any fines associated with the Indonesian injunction, and
it ordered Pertamina to indemnify KBC for any penalties arising
from the Indonesian injunction. Although the district court’s
efforts to keep Pertamina from securing an injunction in Indonesia
may be moot, other aspects of the district court’s preliminary
injunction, particularly the portion of that order requiring
indemnification, continue to give Pertamina a concrete interest in
this dispute.34 Similarly, KBC is still potentially subject to both
32
Dailey v. Vought Aircraft Co., 141 F.3d 224, 227 (5th
Cir. 1998)
33
See id.
34
In addition, a second contempt motion is presently
pending before the district court, this one relating to
Pertamina’s alleged violation of this preliminary injunction
and other subsequent orders enjoining Pertamina from taking
substantive steps in the Indonesian action. The district
court has indicated that it will not rule on the second
contempt motion until we rule on the propriety of the
16
the fines and the penalties imposed by the Indonesian court, and
therefore maintains an interest in affirming the indemnification
aspects of the district court’s preliminary injunction order. For
these reasons, we hold that Pertamina’s appeal of the preliminary
injunction is not moot.
C. ANTISUIT INJUNCTION
When a preliminary injunction takes the form of a foreign
antisuit injunction, we are required to balance domestic judicial
interests against concerns of international comity. In assessing
whether an injunction is necessary, we weigh the need to “prevent
vexatious or oppressive litigation”35 and to “protect the court’s
jurisdiction”36 against the need to defer to principles of
international comity. We have noted, however, that notions of
comity do not wholly dominate our analysis to the exclusion of
these other concerns.37
1. Vexatiousness and Oppressiveness of Foreign Litigation
In determining whether proceedings in another forum constitute
vexatious or oppressive litigation, we have looked for the presence
of several interrelated factors, including (1) “inequitable
preliminary injunction.
35
Kaepa, Inc., 76 F.3d at 627.
36
MacPhail v. Oceaneering Int’l, Inc., 302 F.3d 274, 277
(5th Cir. 2002).
37
Kaepa, Inc., 76 F.3d at 627.
17
hardship” resulting from the foreign suit;38 (2) the foreign suit’s
ability to “frustrate and delay the speedy and efficient
determination of the cause”;39 and (3) the extent to which the
foreign suit is duplicitous of the litigation in the United
States.40
The district court concluded, and on appeal KBC continues to
contend, that Indonesia is not a proper forum for an annulment
action under the New York Convention, irrespective of Pertamina’s
apparently self-serving argument that Indonesia is a “primary”
jurisdiction. To resolve the instant dispute, however, it is not
necessary for us to address the Indonesian court’s decision to
issue its own injunction and to entertain an annulment action under
the Convention. Several structural aspects of the New York
Convention indicate that none of the factors that usually
contribute to vexatiousness and oppressiveness are at play here.
When the Convention was drafted, one of its main purposes was
to facilitate the enforcement of arbitration awards by enabling
parties to enforce them in third countries without first having to
obtain either confirmation of such awards or leave to enforce them
from a court in the country of the arbitral situs.41 Under the
38
Id. (citation omitted).
39
Id. (citation and internal quotation marks omitted).
40
MacPhail, 302 F.3d at 277.
41
See Albert Jan van den Berg, The New York Arbitration
Convention of 1958: Toward a Uniform Judicial
18
Convention, a court maintains the discretion to enforce an arbitral
award even when nullification proceedings are occurring in the
country where the award was rendered.42 Furthermore, an American
court and courts of other countries have enforced awards, or
permitted their enforcement, despite prior annulment in courts of
primary jurisdiction.43 Here, KBC was able to initiate proceedings
Interpretation, at 7, 9 (1981). The antecedent Geneva
Convention required an award to be final in the country were
it was made before enforcement was possible in a third
country, which was interpreted to mean that a court of the
country of origin had to give leave to allow enforcement
(also called the “double exequatur” problem). Van den Berg,
at 7. The New York Convention resolved this problem by only
requiring rewards to be “binding” on the parties rather than
“final” in order for enforcement to occur in a court of
secondary jurisdiction. Id. at 9; Alghanim, 126 F.3d at 22
(recognizing the New York Convention’s change in no longer
requiring recognition in the rendering state before
enforcement in a court of secondary jurisdiction was
possible).
42
Article VI grants an enforcement court discretion to
enforce an award even though annulment proceedings may be
taking place elsewhere. New York Convention, art. VI
(providing that an enforcement court “may, if it considers
it proper” stay its enforcement proceedings while an
annulment action takes place elsewhere). See Leonard V.
Quigley, Accession by the United States to the United
Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 70 Yale L.J. 1049, 1071 (1961)
(explaining that as a “reasonable complement to Article
V(1)(e)” Article VI is “wholly discretionary, and the
enforcing State is free to refuse adjournment and to enforce
the award, nullification proceedings in the rendering State
notwithstanding”).
43
See Chromalloy Aeroservices v. Arab Republic of Egypt,
939 F.Supp. 907, 909-13 (D.D.C. 1996) (enforcing an arbitral
award made in Egypt despite annulment of the award by
Egyptian courts, in part because Article V only makes
refusal to enforce discretionary, and in part because
Article VII enables a secondary jurisdiction to enforce an
19
in a secondary jurisdiction (the United States) to enforce the
Award before a court of primary jurisdiction (Switzerland) had
ruled on Pertamina’s appeal of the Award.
By allowing concurrent enforcement and annulment actions, as
well as simultaneous enforcement actions in third countries, the
Convention necessarily envisions multiple proceedings that address
the same substantive challenges to an arbitral award. For
instance, Article (V)(1)(d) enables a losing party to challenge
enforcement on the grounds that the arbitral panel did not obey the
law of the arbitral situs, i.e., the lex arbitri, even though such
a claim would undoubtably be raised in annulment proceedings in the
rendering State itself. In addition, this case illustrates that
enforcement proceedings in multiple secondary-jurisdiction states
can address the same substantive issues. As noted, in addition to
the U.S. proceeding, KBC has initiated enforcement actions in
Canada and Singapore, and has already secured enforcement in Hong
Kong. Although KBC contends that other courts will give res
judicata effect to U.S. enforcement, the recent decision of the
High Court of the Hong Kong Special Administrative Region Court of
First Instance demonstrates that other enforcement courts can and
award if allowed by its domestic law). See also Domenico Di
Pietro and Martin Platte, Enforcement of International
Arbitration Awards: The New York Convention of 1958, at 169-
70 (2001) (discussing a court’s discretion to enforce an
award despite annulment elsewhere and listing several
examples of the exercise of such discretion in other
national courts).
20
sometimes do conduct their own independent analyses of substantive
challenges to the enforcement of the foreign award.44 In short,
multiple judicial proceedings on the same legal issues are
characteristic of the confirmation and enforcement of international
arbitral awards under the Convention.
Another important aspect of the New York Convention is its
assigning of different roles to national courts to carry out the
aims of the treaty. Articles IV and V of the Convention specify
the procedures for courts of secondary jurisdictions to follow when
deciding whether to enforce a foreign arbitral award. Article IV
provides that a party can obtain enforcement of its award by
furnishing to the putative enforcement court the authenticated
award and the original arbitration agreement (or a certified copy
of both).45 Article V, in turn, enumerates specific grounds on
which the court may refuse enforcement if the party contesting
enforcement provides proof sufficient to meet one of the bases for
refusal.46
In contrast to the limited authority of secondary-jurisdiction
courts to review the arbitral award, courts of primary
jurisdiction, usually the courts of the country of the arbitral
44
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan
Gas Bumi Negara, (High Court of the Hong Kong Special
Administrative Region Court of First Instance, March 27,
2003) [hereinafter “Hong Kong decision”]
45
New York Convention, art. IV(1).
46
Art. V.
21
situs, have much broader discretion to set aside an award. By its
silence on the matter, the Convention does not restrict the grounds
on which primary-jurisdiction courts may annul an award, thereby
leaving to a primary jurisdiction’s local law the decision whether
to set aside an award.47 Consequently, even though courts of a
primary jurisdiction may apply their own domestic law when
evaluating an attempt to annul or set aside an arbitral award,
courts in countries of secondary jurisdiction may refuse
enforcement only on the limited grounds specified in Article V.48
When we take into consideration these features of the New York
Convention, we see that none of the factors that support antisuit
injunctions are strong here. First, as the Convention already
provides for multiple simultaneous proceedings, it is difficult to
envision how court proceedings in Indonesia could amount to an
inequitable hardship. Not only did KBC contract to arbitrate its
dispute in a foreign country (Switzerland), but it also instituted
47
Di Pietro, at 169 (explaining that by failing to restrict
the grounds for setting aside an award in the rendering
State, the Convention left the matter to that State’s
domestic law, a problem described as the “anathema of local
particularities”); Quigley, at 1070 (explaining that one
reason the Convention failed to establish grounds for
annulment in a rendering State is that it would have been
considered “meddling with national procedure for handling
domestic awards”).
48
Alghanim, F.3d at 23. As described infra, however,
enforcement courts do maintain discretion to enforce an
award despite annulment elsewhere. Furthermore, although a
primary jurisdiction maintains more bases on which to set
aside an award, several likely track the grounds provided
for in Article V.
22
enforcement proceedings in several countries, including the United
States. Indeed, but for Pertamina’s initiation of a law suit in
Indonesia, or perceived bias there, KBC conceivably might have
attempted enforcement there as well.
It is also uncertain whether the financial hardship about
which KBC complains will ever materialize. The Indonesian
injunction imposes fines of $500,000 per day on KBC for as long as
it pursues enforcement of the award. In challenging the contempt
order in district court, however, Pertamina indicated, based on
advice from Indonesian counsel, that the injunction is
unenforceable until Pertamina seeks permission from a higher
Indonesian court to enforce it; and Pertamina has promised the
district court that it will not pursue enforcement of the Indonesia
injunction. Even if Pertamina were to initiate proceedings to
enforce this financial penalty, and the Indonesian court were to
fine KBC for its enforcement efforts outside of Indonesia,49 it is
anything but clear that this would cause KBC financial hardship:
There is no record evidence that KBC has substantial assets in
Indonesia.
Although it is always possible for Pertamina to pursue
enforcement of the fines in third countries, it seems extremely
49
Pertamina has also introduced into the record its
Indonesian legal counsel’s opinion that the Indonesian court
injunction only concerns KBC’s attempts to enforce the
arbitral award in Indonesia, not its actions elsewhere in
the world, because as a general rule injunctions issued by
Indonesian court do not have extraterritorial effect.
23
unlikely that any country would countenance such a claim, given
Pertamina’s dubious behavior throughout this process.50
Furthermore, even if KBC should have substantial assets in
Indonesia, it is arguable that Pertamina would have found another
reason to convince Indonesian courts to seize those assets.
Pertamina could have sought monetary relief in the Indonesian
courts regardless of the basis for KBC’s claims elsewhere, and
Indonesian courts, if truly determined to protect Pertamina at any
cost, likely would have been willing to grant the relief requested.
Nevertheless, as a court of secondary jurisdiction under the New
York Convention, charged only with enforcing or refusing to enforce
a foreign arbitral award, it is not the district court’s burden or
ours to protect KBC from all the legal hardships it might undergo
50
When KBC first attempted to enforce its award in the
district court, Pertamina requested that the district court
stay the proceedings pending the outcome of Swiss court
proceedings. In making this request, as well as in other
submissions to the district court, Pertamina continuously
represented to the district court that Swiss arbitral law
governed the arbitration. Indeed, the district court
admitted that it partially relied on these representations
when it slowed the enforcement proceedings. Pertamina also
apparently made similar representations to the arbitral
panel itself. Only after Swiss courts had dismissed
Pertamina’s appeals, and the district court enforced the
award in favor of KBC, did Pertamina file suit in Indonesian
court. Regardless of its reasons for the delay, its
complete silence as to its ability to file in Indonesian
court (based on the applicability of Indonesian arbitral
law) throughout the span of litigation, is certainly
sufficient grounds to find Pertamina’s behavior dubious and
somewhat deceptive. Whether or not the Indonesian court is
a proper forum, Pertamina implied more than once that Swiss
law was the applicable arbitral law in this dispute.
24
in a foreign country as a result of this foreign arbitration or the
international commercial dispute that spawned it.
Second, there is little evidence that the Indonesian
injunction or annulment action will “frustrate and delay the speedy
and efficient determination of the cause.”51 Although it may
occasion some temporary delay, an Indonesian annulment is wholly
ineffective in curtailing the ability of any court of secondary
jurisdiction, including U.S. courts, to enforce the arbitral award.
As an enforcement jurisdiction, our courts have discretion under
the Convention to enforce an award despite annulment in another
country, and have exercised that discretion in the past.52 The
discretion to enforce in this case is even more well-founded, as a
Swiss court with indisputable primary jurisdiction under the
Convention has already dismissed Pertamina’s challenge to the
Award. Furthermore, even though an Indonesian annulment may force
secondary-jurisdiction courts to consider that judgment in deciding
whether to enforce the Award, they nonetheless must undertake an
enforcement analysis. This slight additional expenditure of
judicial resources seems inconsequential, as annulment is only one
of several grounds on which recognition and enforcement may be
51
Kaepa, Inc., 76 F.3d at 627 (citation and internal
quotation marks omitted).
52
Chromalloy Aeroservices, 939 F.Supp. 907.
25
refused;53 and some of these grounds have already been raised by
Pertamina in the district court as well as in the enforcement
proceeding in Hong Kong.54
Third, the duplication inherent in the Indonesian proceedings
is less problematic than it might be otherwise, as the Convention
already allows for multiple proceedings addressing the same or
similar legal bases against enforcement and confirmation.
Additionally, to any extent that the Indonesian courts might be
acting as legitimate courts of primary jurisdiction, such courts
would have domestic law grounds on which to analyze the propriety
of a foreign arbitral award, but which, under the Convention, may
not be relied on by enforcement courts in other States. Thus,
assuming arguendo that the Indonesian courts might somehow be
53
See New York Convention, art. V(1) (other bases for
refusing enforcement include, inter alia, that (1) the
parties were under some incapacity, or the agreement was not
valid under the arbitral law chosen by the parties or the
law of the country where the award was made; (2) the party
against whom the award is invoked was given insufficient
notice of the arbitration proceedings or was unable to
present his case; (3) the award contains decisions on
matters that go beyond the scope of the submission to
arbitration; and (4) the composition of the arbitral
authority or the arbitral procedure violated the agreement
of the parties or the law of the country where the
arbitration took place). Even though many of these reasons
may have no basis of fact in this dispute, they nonetheless
constitute arguments that an enforcement court may very well
have to confront in its proceedings.
54
Karaha Bodas Co., 190 F. Supp. 2d at 945-957; Hong Kong
Decision, (High Court of the Hong Kong Special
Administrative Region Court of First Instance, March 27,
2003).
26
deemed to be courts of primary jurisdiction, they still would not
precisely duplicate the enforcement proceedings that took place in
the United States.
Finally, the Indonesian court proceedings do not threaten the
integrity of the district court’s jurisdiction or its Judgment
enforcing the Award. As courts of secondary jurisdiction here, the
authority of U.S. courts is restricted to enforcing or refusing to
enforce the arbitral award under the Convention. The district
court has chosen to enforce the Award, and the Indonesian annulment
only has an effect here to the extent that our courts chose to
recognize it. Thus, the integrity of our jurisdiction and the
district court’s judgment will not be affected unless we decide
that the Indonesian annulment is in fact valid and that this
annulment outweighs the Swiss court’s confirmation of the Award.
Otherwise, under the Convention, we maintain the discretionary
authority to ignore the Indonesian proceedings and affirm the
district court’s decision to enforce the Award here. Furthermore,
the integrity of the district court’s decision vis-à-vis other
secondary enforcement jurisdictions is not harmed, as these courts
are prone to conduct their own independent enforcement analyses
anyway. Hong Kong’s recent decision to enforce the Award not only
supports this conclusion, but also illustrates that an Indonesian
27
court’s annulment fails to jeopardize enforcement of the Award
elsewhere as well.55
2. Interests in International Comity
Balanced against the scant vexatiousness and oppressiveness of
Pertamina’s acts are the not-insubstantial interests in preserving
international comity. Neither a matter of legal obligation nor of
mere courtesy, comity has long counseled courts to give effect,
whenever possible, to the executive, legislative and judicial acts
of a foreign sovereign so as to strengthen international
cooperation.56 The doctrine of comity contains a rule of “local
restraint” which guides courts reasonably to restrict the
extraterritorial application of sovereign power.57 In this vein,
we have impliedly recognized the importance of comity when a case
implicates public international issues and when prior steps in
55
See Hong Kong decision (stating that “the fact that the
court in Indonesia has now annulled the award under its own
law is also a matter which has no effect on this court’s
task”).
56
Hilton v. Guyot, 159 U.S. 113, 163-64 (1895) (describing
comity as “the recognition which one nation allows within
its territory to the legislative, executive or judicial acts
of another nation, having due regard both to international
duty and convenience, and to the rights of its own citizens
or of other persons who are under the protection of its
laws”).
57
Harold G. Maier, Extraterritorial Jurisdiction at a
Crossroads: An Intersection Between Public and Private
International Law, 76 Am. J. Int’l L. 280, 281 (1982). See
also Restatement (Third) of Foreign Relations, § 403, rptr’s
n. 2 (1987) (stating that courts have invoked “comity” in
“approaching challenges to the reach of United States
jurisdiction to prescribe”).
28
resolving a dispute have taken place in international fora.58 The
immediate issue in this case is whether an injunction, which
effectively attempts to arrest the judicial proceedings of another
foreign sovereign —— here, Indonesia —— sufficiently upsets our
interests in preserving comity among nations.
The district court concluded that its injunction did not
“impinge on another court’s jurisdiction or cause comity concerns,”
because it had already issued a final judgment, thereby minimizing
the reason to defer to proceedings elsewhere, and because Indonesia
was not a proper court of primary jurisdiction under the
Convention. The district court reasoned that, in fact, it was the
Indonesian action that upset comity by permitting the relitigation
of issues already decided by the district court, thereby
threatening to erode the effectiveness of the district court’s
judgment, both here and abroad.
We agree that there is strong evidence in this instance
favoring Switzerland as the paramount country of primary
jurisdiction under the Convention. The district court and the Hong
Kong Court of First Instance suggest at least three potential bases
for finding that Swiss law effectively constitutes the lex arbitri
of this case: (1) Pertamina previously argued in favor of Swiss
58
See Kaepa, Inc., 76 F.3d at 627 (finding no threat to
interstate relations, and thus no need to defer to notions
of comity, when “no public international issue is
implicated,” and when “the dispute has been long and firmly
ensconced within the confines of the United States judicial
system”).
29
arbitral law, which may reveal the parties’ original contractual
intentions to apply Swiss law in arbitration; (2) the parties
failed clearly to choose Indonesian arbitral law in their
agreement, as may be required by international law when parties
want to select an arbitral law other than that of the arbitral
situs; and, finally, (3) Pertamina may be judicially estopped from
arguing otherwise because it contended strenuously in the district
court, proffering arguments on which the court relied, that Swiss
arbitral law applies to this dispute. Whether Switzerland is the
only country of primary jurisdiction (and, impliedly, whether
Indonesia could be a proper forum for annulment), however, is an
issue that is not directly before us today. That issue arises
under Article V of the Convention as a defense to enforcement,
which the district court decided earlier, and which was on separate
appeal before another panel of this Court and thereafter before the
district court on remand.
Nevertheless, even if the Indonesian court acted wrongly in
its decision to annul the Award as a purported court of primary
jurisdiction under the New York Convention, we need not directly
address the propriety of that court’s injunction and annulment.
Contrary to the district court’s conclusions, legal action in
Indonesia, regardless of its legitimacy, does not interfere with
the ability of U.S. courts, or courts of any other enforcement
jurisdictions for that matter, to enforce a foreign arbitral award.
Furthermore, as we have explained, the “relitigation” of issues is
30
characteristic of the Convention’s confirmation and enforcement
scheme. Lastly, the district court’s “final judgment” is not truly
a decision on the merits; rather, it is an order to enforce an
award resulting from litigation elsewhere, which is not necessarily
given res judicata effect in foreign jurisdictions.59
This case also differs significantly from Kaepa, in which we
found comity concerns insignificant because that case dealt with a
contractual dispute between private parties and was “long and
firmly ensconced within the confines of the United States judicial
system.”60 Unlike the foreign litigation at issue in Kaepa, this
case implicates public international issues and has been litigated
chiefly in non-American fora.
The instant dispute implicates three public international
issues. First, this is not a purely private dispute, as Pertamina
is wholly owned by the GOI, and the claims at issue in the
arbitration arose from sovereign acts of that government. Second,
even if Pertamina is acting in bad faith by pursuing annulment in
59
Proceedings in multiple jurisdictions normally should be
allowed at least until judgment is reached in one, at which
point res judicata can be pleaded in the other. Laker
Airways Ltd. v. Sabena, 731 F.2d 909, 926-27 (2d Cir.
1984). The implication of this principle is that comity
concerns diminish once a final judgment has been reached in
one court. See id. at 928. This rule-of-thumb is
inapplicable here, however, where the U.S. court acts merely
as a secondary-jurisdiction court under the Convention; it
only enforces, or refuses to enforce, awards arbitrated
elsewhere, and those decisions do not automatically receive
res judicata effect.
60
76 F.3d at 627.
31
Indonesia (as it appears to be), the district court’s attempt to
enjoin Pertamina effectively translates into an attempt to enjoin
the Indonesian court itself and to interfere with the sovereign
actions of the GOI.61 When viewed in a vacuum, enjoining Pertamina
might appear to be the right answer in this case; but when viewed
in total context, its effect tends to clash with the general
principle that a sovereign country has the competence to determine
its own jurisdiction and grant the kinds of relief it deems
appropriate.
Third, and perhaps most importantly, allowing such an
injunction to stand could set an undesirable precedent under the
Convention, permitting a secondary jurisdiction to impose penalties
on a party when it disagrees with that party’s attempt to challenge
an award in another country. It is at least conceivable that by
using the district court’s decision as persuasive authority, an
enforcement court in a future dispute might attempt to enjoin
proceedings in countries with arguable primary jurisdiction, or in
countries with clear primary jurisdiction but with which the
61
We recognize that the district court was familiar with
its role under the New York Convention, and was attempting
only to thwart the actions of Pertamina and not Indonesia
courts generally. Nonetheless, after review of the record
and the Indonesian court’s holdings, we conclude that an
attempt to enjoin Pertamina has the undeniable effect, even
if unintended, of an attempt to enjoin the courts of
Indonesia themselves. See Donovan v. City of Dallas, 377
U.S. 408, 413 (1964) (citations omitted) (indicating that an
injunction issued at a party does not avoid the tension such
an injunction creates with the other court exercising
jurisdiction over that party).
32
enforcement country’s court radically disagrees. Reaching out to
enjoin proceedings abroad cuts against the Convention’s grants of
separate and limited roles of primary-jurisdiction courts to annul
awards, and of secondary-jurisdiction courts to enforce, or refuse
to enforce, awards in their own countries.62 In sum, an injunction
here is likely to have the practical effect of showing a lack of
mutual respect for the judicial proceedings of other sovereign
nations and to demonstrate an assertion of authority not
contemplated by the New York Convention.
In addition, the procedural chronology of this case
illustrates the inherently international character of the
proceedings themselves. This case (1) arises from contracts
negotiated and allegedly breached in Indonesia, (2) was arbitrated
and litigated originally in Switzerland, and, (3) involves
primarily non-United States parties. Although enforcement of the
Award in the United States may well satisfy much or even all of
KBC’s claim, our courts are nonetheless courts of secondary
jurisdiction, empowered only to enforce or refuse to enforce the
62
As the Supreme Court has indicated, “[t]he utility of the
Convention in promoting the process of international
commercial arbitration depends upon the willingness of
national courts to let go of matters they normally would
think of as their own.” Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 639, n. 21 (1985).
Even though the Mitsubishi court was primarily addressing
the arbitrability of disputes raising anti-trust issues, its
guidance nevertheless still applies here, where exercise of
a court’s traditional equitable power threatens to upset the
Convention’s assignment of limited, distinct roles to
national courts in the confirmation and enforcement process.
33
foreign award, and then only within the United States. Thus, the
courts of this country do not maintain nearly as meaningful an
interest in the resolution of this dispute, other than to give
effect to a foreign arbitral award, as they do in the great
majority of the cases they hear.
It is true that Pertamina is likely in the wrong here, and
that Indonesia’s injunction and annulment may violate comity and
the spirit of the Convention much more than would the district
court’s injunction. In reality, however, a U.S. court’s injunction
is powerless to prevent or terminate such foreign actions. The
Convention already appears to allow for some degree of forum
shopping,63 and, as with many treaties, the efficacy of the
Convention depends in large part on the good faith of its sovereign
signatories.64 Upholding the district court’s injunction could only
further exacerbate the problem, diplomatically if not legally as
well.
3. Summary
63
See Quigley, at 1070 (finding that Article V.2(a) ——
enabling an enforcement court to refuse recognition and
enforcement if the subject matter of the dispute is not
amenable to settlement by arbitration under the arbitration
law of the enforcement country —— grants parties who
succeeded in arbitration a certain degree of forum-shopping
when choosing where to enforce the award).
64
See id. (arguing that an enforcement country’s authority
in Article V.2(b) to refuse enforcement if contrary to its
public policy “has the effect of relegating the ultimate
decision on the efficacy of the Convention to the good faith
of the Contracting States”).
34
Although Indonesia has already purported to annul the Award,
such annulment in no way affects the authority of the district
court (or this court) to enforce the Award in the United States ——
which is, after all, the principal task of a U.S. court under the
Convention. And, the Award can be enforced here with or without
the district court’s injunction against Pertamina. Similarly,
other enforcement jurisdictions will be forced independently to
weigh the Indonesian annulment with or without awareness of a U.S.
court’s injunction. Inasmuch as the Convention provides for
multiple proceedings and a more limited role for enforcement
jurisdictions, Pertamina’s actions in Indonesia, even if spurious,
are less vexatious and oppressive than they would be outside of
this treaty structure. Finally, given the absence of a practical,
positive effect that any injunction could have, more weighty
considerations of comity dictate that the better course for U.S.
courts to follow is to avoid the appearance of reaching out to
interfere with the judicial proceedings in another country and to
avoid stepping too far outside its limited role under the
Convention.
D. THE CONTEMPT ORDER
Although the district court denied Pertamina’s motion to purge
contempt, it expressly held that the TRO and contempt order were
“superceded by th[e] preliminary injunction, and all restraints not
expressly set forth in [the injunction were] dissolved.” Given
this pronouncement, the only district court order that should be
35
subject to review on appeal to us is the preliminary injunction.
By reversing and vacating the preliminary injunction, we addressed
the substantive provisions of the contempt order, most importantly
the indemnification provisions, that were included in the
injunction, thereby making it unnecessary for us to address now the
contempt order itself. Nevertheless, because the parties chose to
focus separately on the contempt order, and because we want to make
clear that no part of the contempt order remains valid, we briefly
address the contempt order as well.
In United States v. United Mine Workers of America, the
Supreme Court held that even though criminal contempt orders endure
if the injunction on which they are based is vacated or found moot,
“[t]he right to remedial relief [through a civil contempt order]
falls with an injunction which events prove was erroneously
issued.”65 We and several other circuits have expressly adopted
this rule.66
65
330 U.S. 258, 294-95 (1947) (“It does not follow, of
course, that simply because a defendant may be punished for
criminal contempt for disobedience of an order later set
aside on appeal, that the plaintiff in the action may profit
by way of a fine imposed in a simultaneous proceeding for
civil contempt based upon a violation of the same order.).
66
United States Steel Corp. v. United Mine Workers, 519
F.2d 1236, 1249 (5th Cir. 1975) (recognizing and applying
the rule that “disobedience of a void preliminary injunction
does not carry civil contempt penalties”). See also Klett
v. Pim, 965 F.2d 587, 590 (8th Cir. 1992) (finding that
“[c]ompensatory civil contempt does not survive if the
underlying injunction is vacated because it was issued
erroneously”); Hampton Tree Farms, Inc. v. Yeutter, 956 F.2d
869, 871 (9th Cir. 1992) (finding that “once an injunction
in a civil case has been invalidated, rights granted under
36
Given the rule’s clarity, the only remaining question is
whether the contempt order that the district court imposed on
Pertamina is civil or criminal. The Supreme Court has indicated
that “[i]t is not the fact of punishment but rather its character
and purpose that often serve to distinguish civil from criminal
contempt.”67 Thus, we have stated that “[t]he test for determining
the civil or criminal nature of a contempt order is the apparent
purpose of the trial court in issuing the contempt judgment.”68
When the purpose is punitive or the injunction is “designed to
vindicate the authority of the court,” the contempt order is
criminal, but when the court is coercive or remedial in its
purpose, the order is civil.69
In the instant case, the district court expressly held
Pertamina to be in civil contempt of court. In addition, although
the district court was motivated to maintain the status quo and
protect its own authority, the express commands of the contempt
order were directed at shepherding Pertamina’s future actions, not
the injunction no longer exist and cannot be enforced”);
Blaylock v. Cheker Oil Co., 547 F.2d 962, 966 (6th Cir.
1976) (recognizing and applying from United Mine Workers
rule); Latrobe Steel Co. v. United Steel Workers, 545 F.2d
1336, 1345 (3d Cir. 1976) (affirming rule that “compensatory
civil contempt does not survive the abrogation of the
underlying decree”).
67
Shillitani v. United States, 384 U.S. 364, 369 (1966)
(citation and internal quotation marks omitted).
68
In re Hunt, 754 F.2d 1290, 1293 (5th Cir. 1985).
69
Id. (citation and internal quotation marks omitted).
37
necessarily punishing it for past misbehavior: (1) The order
directed Pertamina’s counsel to withdraw the application for
injunctive relief that was pending before the Indonesian court; (2)
it directed Pertamina to request that the Indonesian courts vacate
any court-ordered injunctive relief; (3) it directed Pertamina to
indemnify KBC for any future monetary penalties imposed by
Indonesian court; (4) it declared that KBC has no obligation to pay
Pertamina any penalties that might be imposed by Indonesian courts;
and (5) it ordered Pertamina to pay KBC for fines imposed by any
other court because of KBC’s violation of the Indonesian court
injunction and to do so before KBC’s payment is due to such courts.
In short, most, if not all, of the penalties imposed on Pertamina
by the district court’s contempt order were meant to coerce
Pertamina to end all actions in Indonesian courts and refrain from
acting on any decrees of those courts.70 As best we can tell,
Pertamina’s apparent failure to stop the Indonesian proceedings
never resulted in immediate monetary penalties against KBC.
The obvious purpose of the district’s court’s contempt order
was to constrain Pertamina to comply with the court’s substantive
orders rather than to punish Pertamina for any past misconduct.
Coupled with the district court’s express civil label, these
particular aspects of the contempt order satisfy us that it is
truly civil in character, which requires us to vacate that order,
70
The Preliminary Injunction Order substantially repeated
the demands upon Pertamina.
38
to the extent it still persists, along with the preliminary
injunction, as dictated by the criminal/civil dichotomy of United
Mine Workers.71
III. CONCLUSION
We empathize with the district court and share its
frustrations at the acts of Pertamina and its counsel. For the
foregoing reasons, however, we are constrained to reverse the
district court and vacate the preliminary injunction and, as
necessary, the contempt order against Pertamina.
REVERSED; PRELIMINARY INJUNCTION (and ORDER OF CONTEMPT)
VACATED.
S:\OPINIONS\PUB\02\02-20550.CV0
4/28/04 10:58 am
71
330 U.S. at 294-95.
39